Why Divorce Will Lower Your Standard of Living

Everyone knows that divorce is expensive. Everyone knows that it will reduce your standard of living.

But it is seldom recognized that the villain isn't the lawyers. Nor is it the nasty, unreasonable spouse. It's something much more basic.

Divorce makes two households out of one.

While two can't live as cheaply as one, couples have the benefit of shared living expenses. So two can live together for less than two people living separately. Children enjoy the same benefit, all the way up to "cheaper by the dozen."

So here's a question: Can we measure the dis-economy of divorce?

It took a visit to the now thoroughly terrorist-proof Library of Congress to do it, but the answer is yes. I went to the Library of Congress to find a 1968 paper that had been lost from the Burns Library of Incredibly Musty Documents.

Researcher Carolyn A. Jackson for the Department of Labor wrote the enchantingly titled paper, "Revised equivalence scale for estimating incomes or budgets costs by family type." Even now, nearly 40 years later, it is regularly footnoted in research on the cost of living for households of different size.

Here's how it works. The scale measures the cost of living as an index for families of different composition. The base case, index 100, is a husband and wife, age 35 to 54, with two children, with the older child aged 6 to 15. All index numbers rise or fall from there.

A single person under 35, for instance, has an index of 35. When that single person marries another single person, index 35, the index for the combined husband and wife household they become rises to 49. So their cost of living as a couple rises by only 40 percent from the cost of being single. The cost of living per adult is 70 percent of the cost of living alone. Arrange the index numbers in an age/life cycle sequence and you can see the long-term rise and fall of creating and raising a family.

So what happens when a family comes apart?

The economies of shared living are lost.

Here are a few examples. Start with the basic index couple, age 35 to 54, with two children. Remember, their cost of living is an index of 100. When they become a single person and an adult with two children, they become an index of 36 and an index of 76. So their new cost of living is a total of 112. All other things being equal, their cost of living has risen by 12 percent (112/100). To share the same resources equally, each household will see an inevitable standard of living reduction.

How about a younger couple with one child? Their index is 62 and they become a single person, index 35, and a parent with one child, index 40. So their new total is 75, indicating a cost of living increase of 21 percent (75/62). The same young couple with two children would go from a family index of 77 to a single adult, index 35, and one adult with two children, index 67, total 102. That's an expense increase of 32 percent (102/77).

Needless to say, none of these figures should be inscribed in clay tablets. Spending patterns change and this index was constructed when Lyndon Johnson was President. We didn't have fax machines back then, let alone personal computers, digital cameras, and iPods. Today we spend more of our income on housing than we did then and shelter is one of the big issues in divorce.
Shelter is also painfully indivisible -- and a major fixed expense. As a consequence, these estimates probably understate the cost of dividing a family into two households.
This is another reason one of the best ways to become modestly wealthy in America has nothing to do with investments: Get married and, then, stay married.

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